3. Allowance for Loan Losses

The following table shows the allocation of the allowance for loan losses at June 30, 2011 and December 31, 2010 by portfolio segment and by impairment methodology (in thousands):

June 30, 2011	Commercial Real Estate			Agricultural Real Estate		Real Estate Construction			Residential 1st Mortgages			Home Equity			Agricultural			Commercial			Consumer & Other			Unallocated			Total

Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2011	$	7,631		$	1,539	$	2,160		$	1,164		$	3,724		$	6,733		$	9,084		$	216		$	10		$	32,261
Charge-Offs		(13	)		-		-			(340	)		(462	)		(2,750	)		(176	)		(87	)		-			(3,828	)
Recoveries		-			-		-			4			7			15			9			24			-			59
Provision		(1,892	)		1,274		202			370			181			2,286			1,877			99			53			4,450
Ending Balance- June 30, 2011	$	5,726		$	2,813	$	2,362		$	1,198		$	3,450		$	6,284		$	10,794		$	252		$	63		$	32,942

Second Quarter Allowance for Credit Losses:
Beginning Balance- April 1, 2011	$	5,830		$	2,471	$	2,707		$	1,088		$	3,645		$	7,284		$	9,012		$	191		$	103		$	32,331
Charge-Offs		(13	)		-		-			(36	)		(363	)		(2,750	)		(140	)		(52	)		-			(3,354	)
Recoveries		-			-		-			4			5			15			4			12			-			40
Provision		(91	)		342		(345	)		142			163			1,735			1,918			101			(40	)		3,925
Ending Balance- June 30, 2011	$	5,726		$	2,813	$	2,362		$	1,198		$	3,450		$	6,284		$	10,794		$	252		$	63		$	32,942

Ending Balance Individually Evaluated for Impairment		500			400		-			-			40			350			65			34			-			1,389

Ending Balance Collectively Evaluated for Impairment		5,226			2,413		2,362			1,198			3,410			5,934			10,729			218			63			31,553

Loans:

Ending Balance	$	316,914		$	275,581	$	28,071		$	104,647		$	54,531		$	225,870		$	178,729		$	7,458		$	-		$	1,191,801

Ending Balance Individually Evaluated for Impairment		3,289			3,321		-			441			320			4,077			332			37			-			11,817

Ending Balance Collectively Evaluated for Impairment		313,625			272,260		28,071			104,206			54,211			221,793			178,397			7,421			-			1,179,984

December 31, 2010	Commercial Real Estate		Agricultural Real Estate		Real Estate Construction		Residential 1st Mortgages		Home Equity		Agricultural		Commercial		Consumer & Other		Unallocated		Total

Allowance for Credit Losses:
Ending Balance Allocated to Portfolio Segments	$	7,631	$	1,539	$	2,160	$	1,164	$	3,724	$	6,733	$	9,084	$	216	$	10	$	32,261

Ending Balance Individually Evaluated for Impairment		3,425		365		850		298		-		150		84		-		-		5,172

Ending Balance Collectively Evaluated for Impairment		4,206		1,174		1,310		866		3,724		6,583		9,000		216		10		27,089

Loans:

Ending Balance	$	316,271	$	254,575	$	37,486	$	103,574	$	58,971	$	231,150	$	165,263	$	8,712	$	-	$	1,176,002

Ending Balance Individually Evaluated for Impairment		22,107		1,797		6,193		1,824		13		750		277		-		-		32,961

Ending Balance Collectively Evaluated for Impairment		294,164		252,778		31,293		101,750		58,958		230,400		164,986		8,712		-		1,143,041

The following table shows the loan portfolio allocated by management's internal risk ratings at June 30, 2011 and December 31, 2010 (in thousands):

June 30, 2011	Pass		Special Mention		Substandard		Total Loans
Loans:
Commercial Real Estate	$	276,531	$	16,372	$	24,011	$	316,914
Agricultural Real Estate		248,063		20,188		7,330		275,581
Real Estate Construction		19,855		3,217		4,999		28,071
Residential 1st Mortgages		101,436		2,350		861		104,647
Home Equity		53,928		-		603		54,531
Agricultural		198,109		20,271		7,490		225,870
Commercial		170,421		6,427		1,881		178,729
Consumer & Other		6,872		-		586		7,458
Total	$	1,075,215	$	68,825	$	47,761	$	1,191,801

December 31, 2010	Pass		Special Mention		Substandard		Total Loans
Loans:
Commercial Real Estate	$	281,868	$	9,846	$	24,557	$	316,271
Agricultural Real Estate		237,127		14,563		2,885		254,575
Real Estate Construction		27,734		3,217		6,535		37,486
Residential 1st Mortgages		100,709		1,099		1,766		103,574
Home Equity		58,632		-		339		58,971
Agricultural		218,165		11,521		1,464		231,150
Commercial		160,045		2,965		2,253		165,263
Consumer & Other		8,498		-		214		8,712
Total	$	1,092,778	$	43,211	$	40,013	$	1,176,002

See “Note 1. Significant Accounting Policies - Allowance for Loan Losses” for a description of the internal risk ratings used by the Company. There were no loans outstanding at June 30, 2011 and December 31, 2010 rated doubtful or loss.

The following table shows an aging analysis of the loan portfolio by the time past due at June 30, 2011 and December 31, 2010 (in thousands):

	30-89 Days		90 Days and				Total Past				Total
June 30, 2011	Past Due		Still Accruing		Nonaccrual		Due		Current		Loans
Loans:
Commercial Real Estate	$	163	$	-	$	243	$	406	$	316,508	$	316,914
Agricultural Real Estate		435		-		3,321		3,756		271,825		275,581
Real Estate Construction		-		-		-		-		28,071		28,071
Residential 1st Mortgages		570		-		358		928		103,720		104,648
Home Equity		358		-		246		604		53,927		54,531
Agricultural		299		-		3,437		3,736		222,134		225,870
Commercial		950		-		332		1,282		177,447		178,729
Consumer & Other		74		-		37		111		7,346		7,457
Total	$	2,849	$	-	$	7,974	$	10,823	$	1,180,978	$	1,191,801


	30-89 Days		90 Days and				Total Past				Total
December 31, 2010	Past Due		Still Accruing		Nonaccrual		Due		Current		Loans
Loans:
Commercial Real Estate	$	-	$	-	$	2,348	$	2,348	$	313,923	$	316,271
Agricultural Real Estate		-		-		1,797		1,797		252,778		254,575
Real Estate Construction		-		-		-		-		37,486		37,486
Residential 1st Mortgages		797		-		954		1,751		101,823		103,574
Home Equity		526		-		-		526		58,445		58,971
Agricultural		47		-		-		47		231,103		231,150
Commercial		275		-		207		482		164,781		165,263
Consumer & Other		44		-		2		46		8,666		8,712
Total	$	1,689	$	-	$	5,308	$	6,997	$	1,169,005	$	1,176,002

The following table shows information related to impaired loans at and for the periods ended June 30, 2011 and December 31, 2010 (in thousands):

June 30, 2011	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	244	$	264	$	-	$	272	$	-
Agricultural Real Estate		2,499		2,499		-		1,737		-
Real Estate Construction		-		-		-		-		-
Residential 1st Mortgages		443		579		-		624		1
Home Equity		246		246		-		251		-
Agricultural		146		146		-		97		-
Commercial		190		191		-		203		-
Consumer & Other		-		-		-		11		-
	$	3,768	$	3,925	$	-	$	3,195	$	1
With an allowance recorded:
Commercial Real Estate	$	3,048	$	3,046	$	500	$	1,537	$	2
Agricultural Real Estate		826		822		400		826		-
Real Estate Construction		-		-		-		-		-
Residential 1st Mortgages		-		-		-		-		-
Home Equity		74		83		40		141		1
Agricultural		3,931		6,245		350		2,331		9
Commercial		141		141		65		104		-
Consumer & Other		38		63		34		38		-
	$	8,058	$	10,400	$	1,389	$	4,977	$	12
Total	$	11,826	$	14,325	$	1,389	$	8,172	$	13

December 31, 2010	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	12,218	$	12,442	$	-	$	9,259	$	227
Agricultural Real Estate		975		974		-		867		-
Real Estate Construction		3,092		3,093		-		3,276		71
Residential 1st Mortgages		857		1,197		-		742		26
Home Equity		36		42		-		359		2
Agricultural		-		-		-		430		-
Commercial		140		140		-		1,124		-
Consumer & Other		-		-		-		1		-
	$	17,318	$	17,888	$	-	$	16,058	$	326
With an allowance recorded:
Commercial Real Estate	$	9,907	$	9,909	$	3,425	$	5,141	$	360
Agricultural Real Estate		826		823		365		417		27
Real Estate Construction		3,100		3,100		850		1,308		41
Residential 1st Mortgages		952		997		298		294		8
Home Equity		-		-		-		3		-
Agricultural		750		750		150		188		24
Commercial		137		136		84		34		3
Consumer & Other		-		-		-		-		-
	$	15,672	$	15,715	$	5,172	$	7,385	$	463
Total	$	32,990	$	33,603	$	5,172	$	23,443	$	789

Total recorded investment shown in the prior table will not equal the total ending balance of loans individually evaluated for impairment on the allocation of allowance table. This is because the calculation of recorded investment takes into account charge-offs, net deferred loans fees & costs, unamortized premium or discount, and accrued interest.

The Company does not have commitments to lend additional funds to borrowers with loans whose terms were modified in troubled debt restructurings.